When you are making estate planning arrangements affecting the gifting of real estate, it is very important to ensure that your understanding of the way it is owned is reflected in the wording on the actual Title.

At Duncan.Legal it is part of our due diligence to always do a title search of properties owned to make sure the details match the instructions we receive from clients. Not infrequently issues are detected, such as: the incorrect spelling of owners’ names, a mortgage may still be recorded when owners believe it has been fully paid off, the form of ownership recorded is not what they thought it was or the proportions of the property owned may not align with the owners’ understanding.

Amending details on Title is always tricky and sometimes costly. However, it is always much easier for you to rectify these issues when you are still alive and competent to do so. If an Executor or a Financial Attorney seeks to rectify such errors, the situation may be much more complex because there may be multiple beneficiaries to consider, and any changes made may impact their expectation of inheritance. These factors can greatly increase the costs to your estate and hold up the administration of an estate.

It is a kindness to those you appoint to the roles of Executor or Enduring Power of Attorney Financial, as well as to prospective beneficiaries, to tidy up any anomalies as soon as they are discovered.

Ways of owning real estate

Real estate can be personally owned by two or more persons in 2 ways: either Jointly, or as Tenants In Common as to specified proportions. It is important to understand the difference as these forms of ownership affect how the property passes upon your death.

JOINTLY – Many couples own their property jointly. This means that when one dies, the surviving person owns the property outright, as a consequence of the operation of the doctrine of survivorship. There is no need for a formal transfer of the property. The Title simply needs to be amended to remove the deceased person’s name. The surviving person then owns the property 100% in their sole name.

TENANTS IN COMMON – The other way for multiple persons to hold property is to own a specified share of that property. For example, 3 x siblings might hold a property as equal tenants in common which means they own a one third share each. Each owner can bequeath or sell their one third share independent of the others, unless the siblings have an agreement in place that limits this. It is important that each tenant in common deals with gifting their respective share of the property in their Wills.

When clients understand the differences on ownership and the implications of this for their succession planning, sometimes they may wish to change from Tenants in Common to Joint ownership, or visa versa. There is a stamp duty exemption for the transfer of property that is a principal private residence (“PPR”) between spouses, with the consideration expressed as “for love and affection”. It is available once only in a person’s lifetime, and only in relation to their PPR.

Any other transfers will attract the payment of stamp duty, which can be a considerable amount! This has to be weighed up against the merits of changing the form of ownership.

Holding real estate on behalf of another person & Trust Deeds

A property can also be held “upon trust” by a trustee, on behalf of a named beneficiary or beneficiaries.

Where the trustee(s) of a trust which hold real estate are individuals, it is impossible to tell from looking at a title search that they hold the property beneficially – ie. for someone else. The names of the Trustees are listed in the same was as if they personally owned the property. So you cannot tell from a title search whether a trust exists or not.

(Note that a Self Managed Superannuation Fund is also a type of trust!)

This is where careful storage of the trust deed, which creates the trust, is ESSENTIAL. A lost Trust Deed creates extreme difficulty for an Executor! We recommend that you always file a copy with Duncan.Legal of any Trust Deeds relating to control of assets after your death, so that we can store the document with your estate planning documents.

Ownership by a Company v. holding as a Corporate Trustee

Directors and/or shareholders of small companies can often misdescribe property owned by a company or held by a corporate trustee as “their” property. It is important to appreciate the differences between ownership and control, and also between personal ownership versus corporate ownership.

Once again, a title search of a property that shows that the registered proprietor is a company will not inform you whether the property is owned by the company, or if the company holds it beneficially as a corporate trustee for a beneficiary.

Is a Mortgage is still recorded in the Title?

Sometimes clients are surprised to learn that there is still a mortgage recorded on the Title to their property, as they understand that the loan has been fully repaid. Discharging a mortgage is the final step in having it removed from the Title, but often the Lender does not advise you of this.

Usually discharge requires payment of a fee to the Lender. However, it then provides you with clear Title if you wish to sell the property or bequeath it under your Will.

Alternatively other clients may choose to retain the mortgage as a redraw facility, so as to have ready access to funds at a lower interest rate than if they took out a personal loan, if needed.

Unless there is a reason to retain a fully paid out mortgage on Title, we recommend that the mortgage be discharged and the Title cleared. Again, this can be a kindness to your Executor(s)

Where is your Title?

Finally, we recommend that you always know where the original paper title or the electronic key (“ECT”) is stored.

If you have a mortgage on Title, then the Lender will hold the Title as security for the loan advanced. But many people when they have fully repaid their loans do not seek the return of their Title (whether paper or electronic). Banks not infrequently lose Titles – don’t let it be yours!

If there is no mortgage over the property, we recommend that you take steps to reclaim your electronic or paper title from the Lender. Make arrangements for its storage so that your Executor and/or Financial Attorney know where it can be accessed.

Searching for lost title deeds is another thing that can cause complication, expense and delay to the administration of your estate and the role of being your Executor or Financial Attorney. Your job is to make it as easy as possible for the persons you have appointed to be able to carry out your wishes when you die or lose capacity.

Checking titles is one aspect of your estate planning arrangements that Duncan.Legal are vigilant to cover off! Title searches can be conducted easily, quickly and at low cost. However, the costs of mistakes in succession of real estate later in time can be hugely expensive to an estate, and can have a devastating impact beneficiary relationships.

Many of the issues covered above are easily dealt with if done now. Remember – it is ultimately a kindness to the persons you appoint to ensure that your titles are not carrying issues that will make their job harder.